Exhibit 99-1
News Release
Vectren Corporation
Evansville, IN 47702-0209
P.O. Box 209
January 29, 2003
FOR IMMEDIATE RELEASE
Vectren Corporation
Reports Preliminary 2002 Results
Restates 2001 and Begins Reaudit of 2000
Affirms 2003 Guidance and Declares $0.275 Quarterly Dividend
Evansville, Indiana - Vectren Corporation (NYSE:VVC) today announced preliminary
net income for the year ended December 31, 2002 of $114.6 million, or $1.70 per
share, compared to preliminary net income of $51.2 million, or $0.77 per share,
as restated, for the same period a year ago. The twelve months ended December
31, 2001 included nonrecurring merger, integration, and restructuring costs and
other nonrecurring items totaling $26.4 million after tax.
To effectuate the Company's planned transfer of information technology systems
and related assets and certain buildings from corporate to Vectren Utility
Holdings, Inc., their primary user and our regulated business group, the Company
requested Deloitte & Touche LLP, its newly appointed independent auditors, to
reaudit the Company's 2001 financials. In the course of preparing for the 2001
reaudit, the Company identified adjustments that, in aggregate, reduced
previously reported 2001 earnings by approximately $12.4 million after tax.
The Company's accounting group also identified items which, when netted, amount
to about $300,000 after tax that relate to 2000 and prior periods. Although the
net amount is small, following consultation with Deloitte & Touche the Company
concluded that, since 2001 is already being restated, the best course of action
would be to restate and reaudit 2000 results.
The Company has no reason to believe the 2002 and restated 2001 results will
change; it is possible, however, that the reaudit of 2000 could result in
adjustments. The Company expects Deloitte & Touche to complete its work in time
for the Company to file with the Securities and Exchange Commission its Annual
Report on Form 10-K by March 31, 2003.
Said Niel C. Ellerbrook, Chairman and CEO, "Vectren performed well in 2002 and
our results for the year are consistent with our expectations and the guidance
we had previously provided the financial community. That said, I am extremely
disappointed and regret that these adjustments were necessary. We believe that
three years of financial statements newly audited will provide a good foundation
as we pursue a permanent financing strategy. Furthermore, our review has
resulted in a number of positive procedural enhancements that should ensure this
situation doesn't happen again."
Ellerbrook added: "We have been advised by both Moody's Investors Service and
Standard and Poor's Ratings Services that these adjustments are not expected to
impact our current ratings or their outlook for Vectren Corporation or its
subsidiaries. Similarly, our principal bankers have indicated no change in their
commitment to meet our capital needs in a competitive manner."
Affirms 2003 Guidance and Declares Quarterly Dividend:
Vectren confirmed 2003 earnings guidance in the range of $1.80 to $1.90 per
share, excluding the potential impact of any permanent financing completed
during 2003. Vectren's Board of Directors also declared a quarterly common stock
dividend of 27 1/2 cents per share, unchanged from the last quarter. Vectren and
predecessor companies have recorded 43 consecutive years of annual dividend
increases.
2002 Highlights:
Commenting on the 2002 year, Ellerbrook said: "We made significant strides in
2002 in building for strong future performance. The successful integration of
our utility operations will allow us to continue to improve customer service and
keep costs low. We achieved positive regulatory outcomes in several areas,
especially the approval to recover capital and operating costs related to our
compliance with environmental regulations at our electric generating plants. In
addition, our nonregulated operations continued to grow and are better
positioned to contribute to strong performance."
Regulated utility operations contributed net income of $94.4 million for 2002 as
compared to $38.5 million for 2001 as restated. In addition to the completion of
merger and restructuring activities and related costs, the increase of over $55
million is primarily due to improved utility margins and reduced operating
expenses.
Gas utility margins for the year were $337 million, an increase of $27 million
over the prior year. Heating weather was 7% colder than in 2001, but 3% warmer
than normal. The 10% increase in residential and commercial sales was
principally due to the weather and customer growth. Industrial contract
throughput decreased approximately 2%, reflecting a continued slowdown in the
economy.
Electric utility margins for the year were $230 million, an increase of 9% over
the prior year. Cooling weather was 27% warmer than in 2001 and 23% warmer than
normal. Retail sales increased 6% over 2001 principally due to weather. In
addition, 2002 results were positively affected by a full year of the recovery
through rates of a return on NOx compliance expenditures pursuant to an order of
the Indiana Commission. In January of 2003, the Indiana Commission expanded this
authorization to provide for the recovery of certain operating costs associated
with NOx compliance.
Nonregulated operations contributed net income of $18.9 million for the year
2002 as compared to $12.1 million for 2001, as restated. The 2001 results
include merger, integration and restructuring costs of $2.2 million and an
extraordinary loss on the sale of assets of $7.7 million. The Energy Marketing
and Services group earned $14.8 million in 2002, an increase of $3.1 million due
to improved margins. The slight decline in after tax income from the Coal Mining
group of $2.0 million to $12.2 million was due to lower market prices on third
party coal sales, somewhat lower yield per ton mined, and the Indiana Corporate
Income Tax rate change. The after tax loss from operations from all other
businesses was $4.2 million greater than 2001. The 2001 restated results include
the sale of energy related investments and greater income from leveraged lease
assets that were divested in 2001.
Additional 2001 Restatement Discussion:
In preparation for the reaudit of 2001, the Company determined that an after tax
total of $7.2 million of gas costs, relating primarily to gas inventory
accounting, were inaccurately recorded as "recoverable." This accounting
determination requires no adjustment of regulatory filings or customer billings.
Additionally, approximately $4.1 million in after tax employee benefit costs,
which are routinely accumulated and systematically cleared to operating costs
and construction projects following direct charges, were not relieved from the
balance sheet during 2001. This has now been corrected to record those costs in
the proper period. In addition, $1.1 million after tax in additional items were
also identified. These additional items were not significant, either
individually or in the aggregate, but were corrected. Although there was no
significant impact on net income, the treatment of certain wholesale electric
contracts was modified to comply with SFAS 133, which became effective January
1, 2001. The cumulative effect at adoption was decreased by $2.8 million after
tax, and electric margins increased by a similar amount. As a result of these
adjustments, previously reported 2001 earnings were reduced by a total of $12.4
million after tax, or $0.18 per share.
Vectren Corporation is an energy and applied technology holding company
headquartered in Evansville, Indiana. Vectren's energy delivery subsidiaries
provide gas and/or electricity to over one million customers in adjoining
service territories that cover nearly two-thirds of Indiana and west central
Ohio. Vectren's non-regulated subsidiaries and affiliates currently offer
energy-related products and services to customers throughout the surrounding
region. These services include energy marketing; coal mining; utility
infrastructure services; and broadband communication services. To learn more
about Vectren, visit www.vectren.com.
Live Webcast:
Vectren Corporation will provide more detail on 2002 results on a conference
call for analysts scheduled at 9:30 a.m. ET (8:30 a.m. CT), Thursday January 30,
2003. You are invited to listen to the live Webcast and view the supporting
slides by accessing the Investor Relations link on Vectren's Web site at
www.vectren.com. Interested parties may also view the slide presentation and
listen to the Webcast replay via Vectren's Web site beginning two hours after
the conclusion of the Webcast. A tape-recorded replay of the call will also be
available two hours after the completion of the teleconference through Thursday,
February 6, 2003. To access the replay, dial 706-645-9291 and enter the
conference identification number 7498394.
Safe Harbor for Forward Looking Statements:
This document contains forward-looking statements which are based on
management's beliefs and assumptions that derive from information currently
known by management. Vectren wishes to caution readers that actual results could
differ materially from those contained in this document. Specifically, the
reaudit of its 2000 financial statements could result in the Company restating
its results from 2000, 2001 and 2002. Additional detailed information concerning
a number of factors that could cause actual results to differ materially from
the information that is provided to you is readily available in our report Form
10-K filed with the Securities and Exchange Commission on March 29, 2002.
Investor Contact: Steven M. Schein, (812) 491-4209, sschein@vectren.com
Media Contact: Jeffrey W. Whiteside, (812) 491-4205, jwhiteside@vectren.com
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